With a recession on the cards and some financial uncertainty ahead, it’s more important than ever to plan and mitigate any potential problems.
Here are some key areas to focus on to get your business in the best position possible to navigate the coming weeks and months.
Cut unnecessary costs
With the cost of living crisis, the impacts of Brexit and an upcoming recession on the cards, now is the time to be savvy about business cash and spending.
Assess your cost structure and make tweaks where necessary. We recommend shopping around for energy suppliers to ensure you’re getting the best deal possible. Look for cheaper energy bills and turn off all devices and equipment at the end of the working day to save on energy costs.
Do a business health check
Run financial reports to assess the current health of your business. Your accountant can help you create up-to-date reports like a P&L and Balance Sheet to create a financial snapshot of your business’s income, sales and expenditure.
Set sales targets and work out a plan for how to meet them. With the current cost of living crisis, we’re seeing shopping behaviours changing with customers becoming more reluctant to splash the cash. Think of creative ways you can boost your sales, whether that’s by implementing passive income streams or offering more value to customers.
Keep an eye on your accounting software and make use of diagnostic and reporting tools within Xero to get a 360-degree view of your finances.
Implement a cash flow strategy
Cash flow is the beating heart of a business, and in times of economic difficulty, it’s more important than ever to make cash flow a priority.
Cash flow forecasting is your number one tool for removing uncertainty about the future and mitigating damage during an economic downturn.
Run short-term and long-term forecasts to get an accurate picture of what the future looks like. Use your forecasts to play out potential ‘what-if’ scenarios to gauge how different situations could affect your cash position.
Based on your current sales and trajectory, what will your cash position look like in 3, 6, or 9 months down the line? What’s the goal? Do forecasts based on that goal and figure out how many sales you need to make to get there. Then implement a cash flow strategy to help bolster your sales and future-proof your business for the coming months.
Boost monthly cash flow by collecting payments automatically via direct debit so you don’t have to chase customers. Think of creative ways you can increase cash flow, whether that’s implementing cost-cutting methods like removing unnecessary subscriptions or finding cheaper key resources.
With an upcoming recession on the cards, it’s worth setting up a call with your accountant to nail down your cash flow strategy and create cash projections for the weeks and months ahead. The extra time invested in ensuring you have a strong, steady stream of cash will ultimately be worth its weight in gold.
Monitor, measure and improve your business processes
Future-proof your business by implementing our 3-step process for success:
Monitor
Monitor your business performance to:
- Achieve goals
- Identify areas for opportunity and growth
- Spot problem areas and take action
- Save time and money
- Make better decisions about the future of your business.
Monitor business performance relative to your goals to determine how effective the current elements of your business are, like systems and processes, and whether or not they are helping you achieve your goals.
Measure
Establish business performance by measuring KPIs to track the progress of your financial goals. Look at key financial metrics like cash flow and working capital so you can measure the performance of your business against your goals.
Improve
Use the insights gained to improve your business, whether that’s by making more sales, boosting cash flow, or meeting financial goals more effectively. This is made possible by identifying your goals, carefully monitoring and measuring your success, and refining the tools and methods you use to achieve them.
Talk to your accountant
Having an accountant you can rely on will help you navigate challenging times and come out the other side stronger. A good accountant can help you do more than submit tax returns– they can help you plan for the future with cash flow forecasts and financial reports. You’ll benefit from their wisdom and experience with expert advice and tips to future-proof your business.
In times of uncertainty, having a trusted advisor you can turn to will help you prepare for the upcoming recession and ensure your business is in the best position possible for whatever comes your way.
